The Wolfberry Post! focuses on recent news and information relevant to the Permian Basin and the Wolfberry and Cline Shale formations in Texas as well as information relating to the oil and gas sector.

Sunday, December 29, 2013

The Breitburn
transaction includes 4.7 net wells and 403 net acres for $19.3 million.The price per acre equals $48k/acre which can
be assigned to proven/developed acreage.The transaction equates to approximately 86 acres per well.

To approximate
the amount Lynden’s developed and undeveloped acreage, one can multiply their
net wells by 86 devloped acres/well.Lynden
has a total of 33.0 net wells equaling 2,830 developed acres.With a total of 6,466 net acres, Lynden’s
remaining undeveloped acreage equals 3,636 acres (6,466 – 2,830).After the sale to Breitburn, Lynden will have
2,427 remaining developed acres (2,830 – 403).

Assigning a
value of $48,000/acre to Lynden’s remaining developed acreage and using a
conservative number of $10,000/acre for their remaining undeveloped acreage
results in a Wolfberry value of $153 million (2,427 acres x $48k/acre + 3,636
acres x $10k/acre).These conservative
numbers result in a fully diluted share price of $1.07/share ($153 million /
143.5 million shares).Using $20k/undeveloped
acre results in an additional $0.25/share.

Mitchell Ranch
is still a very exciting upside opportunity.With other companies delineating resource potential around Mitchell
Ranch and Lynden interpreting their own seismic data, Lynden’s 34,150 net acres
could become very valuable.At $2k/acre,
the Mitchell Ranch property could add $0.48/share and at $4k/acre the upside
could be $0.95/share.

What does all
of this add up to?LVL’s Wolfberry
valuation conservatively ranges from $1.07/share to $1.32/share and Mitchell
Ranch adds from $0.48/share to $0.95/share totaling a range of $1.07/share (no value assigned to MR) to
$2.27/share!Obviously, an upside to
today’s share price.

One last thing
to keep in mind… With Chesapeake focusing on acreage outside of the Permian
Basin, it would not be surprising if they let their Mitchell Ranch term
assignment expire.Should this occur,
our view is that this would be a positive by increasing LVL’s Mitchell Ranch
exposure by 17,000 net acres.

6,466 net
acres = $232 million = $1.62/shareLVL's Wolfberry project alone equates to $1.10 to $1.62/share based upon QEP metrics for similar acreage! These metrics do not include Mitchell Ranch which gives Lynden an additional upside!

Map of Lynden's Mitchell Ranch and surrounding development

Please feel free to contact us at wolfberrypost@gmail.com. Disclosure: I am long LVLEF. This blog contains stock ideas and information and does not make recommendations. The intent of this blog is to provide information for discussion and informational purposes and should not be considered to be investment advice. Please complete your own due diligence.